Australian Carriers Defer International Fleet Decisions

While Air New Zealand is preparing to ratchet up its long-haul fleet modernization efforts with new aircraft deliveries, there likely will be very few new widebodies entering the fleets of Australia's full-service carriers in the next 2-3 years.

This year is a significant one for Air New Zealand, which is due to take delivery of its first three Boeing 787-9s as the launch customer for this variant. Across the Tasman Sea, Virgin Australia has one more AirbusA330 to be delivered, and after that has no more twin-aisle orders in place. Qantas, meanwhile, has had to defer A380 deliveries and shelve plans to add 787-9s to its fleet, and its latest financial woes may make new widebody aircraft an even more distant prospect.

Both Virgin Australia and the Qantas mainline operation intend to order next-generation aircraft such as the 787 or the Airbus A350, but they are in no rush to make a decision on firm orders. The main difference between them and Air New Zealand is financial health—while the Kiwi carrier is continuing to record strong profits, the Australian duo are struggling, partly due to their fierce battle for the domestic market.

The Qantas group does have a firm order for 14 787-8s, but these are all destined for its Jetstar low-cost subsidiary. It also placed an order for 35 787-9s for its mainline operation, but in 2012 it canceled these while retaining 50 purchase rights and options.

The 787-9 options are for delivery slots beginning in 2016. The airline has stated it will start converting these to firm orders only if its international unit returns to profitability as planned in 2015.

Qantas has similarly pushed back its remaining orders for A380s. It has 12 in operation, and another eight yet to arrive. The carrier has twice deferred delivery dates for these remaining orders in the past few years, most recently in an effort to cut capital spending. Deliveries of the A380s are now due to resume in 2017, which would mean a gap of more than five years since it last received that type.

Until then, the major change to its widebody fleet will be the transfer of A330-200s from Jetstar as the LCC takes delivery of its 787s. Qantas has received one of these A330s, two more are due in the first quarter, and the remaining seven will be transferred by the middle of 2015. The A330s will replace Qantas Boeing 767-300ERs.

There is a possibility that Qantas's financial problems could cause more disruption to the carrier's fleet renewal plans. The airline has launched a new review of its capital expenditures as it attempts to cut costs even more, and aircraft spending decisions are expected to be among the items considered.

A further update on the capital expenditure review and other cost-cutting measures is expected when the carrier reports its half-year results this month.

Meanwhile, Virgin Australia also is approaching a period with no new widebody deliveries after it takes delivery of the last of eight A330-200s. The final aircraft from this order is due to arrive in September.

Virgin Australia CEO John Borghetti has stated that the carrier is weighing an order for either 787s or A350s, to replace the Boeing 777-300ERs it uses on international flights. But during a full-year earnings call in August, he emphasized that the carrier is in no hurry to place such an order. At the time, he said a decision could be up to 12 months away, or even beyond.

In contrast to its Australian neighbors, Air New Zealand is beginning the latest phase of its widebody renewal program with the arrival of five new aircraft this year. In addition to the three 787-9s, it will also receive two leased 777-300ERs.

Air New Zealand has 10 of the stretched -9 version of the 787 on order, with eight options. The initial delivery—which will be the first to any customer—is due in July, with the next two expected in September and October. There will be a gap after these first three, with the fourth and fifth due in September and October 2015, in time for the peak holiday season.

The airline's first dedicated 787 route will be Auckland-Perth. This flight will be marketed as all-787 from Oct. 15, although the carrier says 787s will be used occasionally on Australian routes before then. Its Tokyo and Shanghai routes are next in line to be switched to the 787.

Air New Zealand's first priority for the 787s is to replace its five 767-300ERs, mainly on Asian routes. However, while the intention is to phase the 767s out, the retirement schedule or disposition of these aircraft has not yet been confirmed, Chief Pilot David Morgan says. The airline has the option of storing the aircraft, which are well-suited to charter work. It is unlikely any will leave the fleet this year, says Morgan.

Eventually Air New Zealand will need a replacement plan for its 777-200ERs, which will be its oldest widebodies once the 747s and 767s are retired. The airline issued a request for information regarding the major manufacturers' widebody programs in 2013, and among the responses was a 777X submission from Boeing. However, Morgan stresses that no formal competition or selection process is underway.

CEO Christopher Luxon confirms that Air New Zealand is not yet considering placing an order to replace the -200ERs. When its existing orders are fulfilled, the airline will have seven 777-300ERs, eight 777-200ERs, and 10 787-9s in its widebody fleet. Luxon says the carrier currently has no plans to add more -300ERs beyond the two coming this year, but says the airline would do so if it saw an opportunity to use them profitably.